Divorce and Insurance
Because we often forget about insurance until we need it, life, health, homeowners and disability coverage issues can get overlooked during a divorce settlement.
In working through your divorce, don’t forget your most valuable assets: your life and your health. Both directly affect your ability to earn income and to care and provide for yourself and your family. You have several areas to look at to ensure you’ve managed your risks.
Most couples name each other as beneficiaries on their life insurance policies. At a minimum you will need to change your beneficiary designations on all policies, regardless of size. You may need to adjust the amount of coverage, particularly if you were the nonworking spouse and you now plan to work to support yourself and your family. Factors to consider include replacing your income, paying off debt and leaving enough to care for your family if you die.
Health insurance usually comes with employment, and again, nonworking spouses will be most at risk in a divorce, since they will no longer be considered dependents covered under the employed spouse’s group insurance. If you work and your employer offers health insurance, the divorce is considered a qualifying event, and you can switch to your employer’s coverage without waiting for an open enrollment period. Call the insurance carrier for your spouse’s policy and request a certificate of insurance. This proves that you were insured until the qualifying event, so you can’t be excluded or charged a higher premium for pre-existing conditions.
If you are not employed, the same qualifying event definition makes you eligible for coverage under COBRA, a federal that allows you to continue the coverage for a certain time period under specific conditions. COBRA can be an expensive option, because you pay the full premium yourself, and is temporary at best. Certain professional groups and other associations also offer group insurance for which you may be eligible. You can also purchase individual health insurance privately, although the rates are typically much higher than a group policy with comparable benefits.
Each year, 12 percent of adult Americans suffer a long-term disability. For every seven employed Americans, one will have a period of disability five years or longer before age 65. A 35-year-old has a 50 percent chance of a disability lasting longer than three months before age 65. With two incomes, you have something of a safety net if you are unable to work because of a short- or long-term disability. Going it alone, you may want to consider disability coverage either through your employer or privately, especially if you have no emergency reserve funds or other income to fall back on.
Your homeowners insurance covers your house and its contents. If you decide to move to an apartment, you may need renter’s insurance to cover your possessions. Check limits for jewelry and other high valuables, such as antiques and collectibles, and purchase riders to cover them if necessary.
Risks play as important a part in forming your financial picture as do your assets and liabilities. With all the products and carriers in the market, the choices can be overwhelming. A financial or insurance professional can help you weigh your options and determine the best course of action during and after your divorce.
Barry Armstrong is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. Armstrong Advisory Group and Securities America are not affiliated. He can be reached at 1-800-393-4001 or by e-mail at email@example.com.